It’s no secret that recent market cycles have created a financial blood bath. Millions of consumers lost trillions in net worth. People who work in real estate or investment banking have seen their livelihoods sink. And millions more Americans have lost their jobs and with them, their ability to stay afloat financially.

Well, you know what happens when financial catastrophe and water mix. You get a lot of blood in the water. And blood, along with survivors thrashing on the surface, attracts those who would benefit from misfortune—sharks.

In today’s environment, revenue-hungry attorneys or clients who are determined to recoup their losses can tear into and gut your business, chew up your net worth, and spit out your professional future.

So what to do? In times like these, your best defense is to triple-check your moral compass. If you continue to do business with a strong commitment to ethics and integrity, you will greatly minimize the odds of a “shark attack.”

However, doing business ethically is just the first step. The second is to purchase a high-quality errors-and-omissions (E&O) insurance policy that is properly designed for your type of business. Being insured won’t necessarily prevent an attack. But it will minimize the aftermath of one, allowing you to swim to shore and get on with your business and life.

However, even if you’re ethically grounded and protected with a good errors-and-omissions insurance policy, you’re still human. That means you may someday make a mistake that sheds client blood, potentially triggering a feeding frenzy. The best defense here is to E&O proof your business practices. Here are just a couple errors-and-omissions loss prevention strategies to consider:

  • E&O Prevention Strategy #1: Make sure your solicitation materials play it totally straight. You never want to misrepresent who you are, what you do, or what you sell.
  • E&O Prevention Strategy #2: Do a rigorous fact-finder and document the client needs you uncovered. Then link your recommendations to the client’s documented needs.
  • E&O Prevention Strategy #3: Educate your clients about what they bought. Make sure they understand what it does and doesn’t do, as well as all its moving parts, fees and expenses, and any underlying risks and guarantees.
  • E&O Prevention Strategy #4: Always stay in your area of expertise. Swimming in water that’s over your head is a recipe for flailing. And you know what flailing attracts.
  • E&O Prevention Strategy #5: Put everything in writing. Make sure your client file documents every key decision. Also make sure to document when clients decline important coverage, such as long-term care insurance. This will protect you from a beneficiary attack.


These five techniques are clearly the surface of a very deep ocean. But here’s the key point: Train yourself to think defensively at all times, while remaining upbeat about the great work you do.

Finally, to prevent errors-and-omissions insurance claims, don’t get out of the water. Instead, swim in the right direction (ethics), with the right protective gear (errors-and-omissions insurance), and with the right strokes (best practices).

For great pricing on E&O insurance click here.

The Incident

An agent writes a $1 million life insurance policy on his then 36-year-old male client. The client requests a premium waiver in case he ever gets disabled. The agent assures the client the policy will be issued with the rider. However, the policy is issued without one. The client receives the policy, never looks at it, and places it in a drawer for safekeeping.

Years go by and the client pays his premium faithfully. One day, on his way home from work, he loses control of his car on the highway due to an oil tanker spill. He’s seriously injured. Ultimately, he loses use of an arm and goes on long-term disability.

Months pass and the client still can’t work. Since he can no longer afford to pay for his life insurance, he tells the company he wants his premiums waived. The company responds that the policy has no such rider. The policy lapses due to non-payment of premium.

Eventually, the client dies from his injuries. The client’s beneficiaries file a death claim with the insurer, which is denied because the policy is no longer in force.

The Claim

The client’s beneficiaries sue the agent and the carrier for negligence, breach of contract, bad faith, misrepresentation, and violation of consumer protection laws.

The Outcome

The agent insists the client never requested a premium waiver. But he has no proof of this.

The client’s beneficiaries claim their loved one asked for the rider in the initial sales interview and that he always believed he had one.

Because the claim is a he-said/she-said scenario, backed by conduct consistent with the client’s believing he had the rider, the insurance company is unable to defend the agent. It settles the claim out of court.

The Takeaway

Agents can avoid such E&O claims by:

• Documenting all client requests in writing.

• Filling out the application line by line during the sales interview.

• At the end of the meeting, confirming what the client bought.

• At policy delivery, reviewing the policy benefits one more time.

• Always encouraging clients to ask questions about their coverage.